Selling or buying a business? Why AI could affect your deal

Selling or buying a business? Why AI could affect your deal

Charles Danjoux, Corporate

Artificial intelligence (AI) is becoming part of everyday business. Whether it's used to draft documents, analyse data, automate customer service or support marketing activity, many businesses now rely on AI in some form.

That growing use of AI means it's becoming an increasingly important consideration when businesses are bought and sold. If you're planning to acquire a business or preparing for a future sale, don't be surprised if AI features in the due diligence process.

Why does AI matter in an M&A transaction?

When buying a business, you want to understand exactly what you're acquiring.

As AI becomes more widely used, buyers are starting to ask new questions about how a business has adopted the technology and whether it has appropriate safeguards in place.

For example, a buyer may want to know:

• Which AI tools does the business use?
• Is confidential or personal information being uploaded into AI platforms?
• Are employees using AI in line with an internal policy?
• Whether AI-generated content is being used in the business?
• Could the use of AI expose the business to legal, regulatory, or contractual risks?

Having clear answers to these questions can help make the due diligence process smoother and give buyers greater confidence in the business.

The legal position

Although the UK does not currently have a single piece of legislation specifically regulating AI, businesses using AI must still comply with a range of existing legal obligations.

Depending on how AI is used, this could include data protection, intellectual property and confidentiality. Buyers will want reassurance that these risks have been properly considered and managed, rather than discovering unexpected issues after the transaction has completed.

AI warranties

In some transactions, particularly where AI forms an important part of the target business, buyers may seek AI-specific warranties.

These warranties typically require sellers to confirm that their use of AI complies with applicable laws and that appropriate governance measures are in place.

While these provisions are still evolving, they reflect a wider trend towards greater transparency around how businesses use AI.

Looking ahead

AI is becoming another area that buyers and sellers need to be prepared to discuss during an M&A transaction. Businesses that can demonstrate responsible use of AI, backed by clear governance and policies, are likely to inspire greater confidence during due diligence. Equally, buyers who ask the right questions about AI use will be better placed to identify risks before completing a transaction.

As AI continues to evolve, it is likely to become an increasingly important part of the M&A process.

Whether you're acquiring a business or preparing for a sale, our Corporate Team can help you navigate the legal and commercial issues surrounding AI as part of your transaction. To find out more, get in touch with Charles Danjoux.